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Friday, February 08, 2019

Sector Contribution Weightage of REITs

As per previous topic of How to Create Your Own Basic REITs Screener, there are different type of sector. A lot of REITs have their income generated from different sectors. However, so far I could not find any site mentioned about that, so I've decided to consolidate one.
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As of now, there are 6 sectors in Singapore, which are retail, office, healthcare, hospitality, industrial and logistics. I classified business park under office and data centre under industrial and convention centre under hospitality. I have also separate logistics out from industrial sector, which I do not see anyone doing that at this moment. There is no right or wrong answer for these classification.

I have created a sheet and updated the latest data, refer below:
All % are based on gross revenue weightage besides Suntec REIT based on net property income. Some data are estimated only as reports do not provide enough information. From the above, there are 13 counters have more than 20% income generated from different sector which itself provide some form of diversification.

I have also created a separate sheet for you to track your sector allocation by cost. What you have to do is to selected from drop down and key in cost in green columns, then the google sheets will do the calculation work. Refer below for example, make a copy of this google sheet through here.

Generally, industrial and logistics sector offer highest dividend yield, however, do not fully invest only into these 2 sectors. Try to spread your investment as evenly as possible. Or you could set a maximum allocation of 20% - 25% for each sector. The same concept goes for individual REIT counter too, set a maximum allocation of 10% to 15% for each REIT, depends on your strategy.
It is important to diversify REITs investment among different sectors.
There are 2 real estate business trusts at this moment, which are Ascendas India Trust and Dasin Retail Trust. These 2 counters are not required to distribute 90% of their taxable income and they can also distribute more than what they earn. REIT gearing limit of 45% is not applicable to business trust as well. So do take notes when you invest in these counters.

All REITs (besides Fortune REIT) publish their result quarterly, this sector diversification information can be updated together when you update your basic REIT screener data. I am very tempted to provide updated information quarterly to my readers, but I feel that one should conduct own research when it comes to own investment. Remember the information verification mentioned previously?  Even if I want to provide data, I would have provide inaccurate or incomplete information too.
Learn to fish is more important than taking fish right?
To me, REITs serve as a proxy to all different industries. So, with investment across different REITs sector, we are actually diversify our investment into different industries as well. Will there be a scenario that all REITs collapse when all stocks rise or flat? Seems unlikely to me.

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